I am looking for a business model that will allow me to charge subscription fees similar to that of a hedge fund, with a small fee based on account size and a percentage of profits. Unfortunately, without undergoing the onerous task of starting a new hedge fund, it would seem to be impossible.
Collective2’s model of charging a flat fee, without regard to a subscriber’s account size, would leave me potentially being paid peanuts while some large fund used the trading advice to reap great wealth.
If anyone can see an alternative to becoming a full hedge fund, while still being properly compensated for the use of trading advice, please do share.
Thanks.
Since you are not managing the person’s money, then I think this is an unreasonable request.
You are allowed by Federal law to be a PUBLISHER of information. You thus avoid all the CTA registraton and reporting. But This means NO individual advice, no knowledge of your client’s account size, etc.
You ARE being properly compensated. As a publisher.
How do you expect to divine the difference between a person with $4K and someone with $80K ?? Once you ask, you open yourself to all sorts of bad things from the CFTC, SEC, NFA, etc…
But trying to expect that you deserve hedge fund performance fees via something like C2 is ridiculous. C2 should stay far away from this type of proposal. It will open up Matthew to government interest for promoting something, when he knows most people are not CTAs…
And first, why not start outperforming almost all other C2 systems that are cheaper than your proposed models?
I thought the new “Autotrade Free” option means that the fee is proportional to the capital in the account. But I’m not sure. In any case, in theory C2 can create a scheme were the fee depends on the scale of the autotrader. This makes sense only for fast trading systems. For slow systems it won’t be possible to do this safely because the subscriber can always look at the open positions in his autotraded account and copy it manually to another account.
This may indeed be an unreasonable request for C2. I can experiment with a very high subscription rate on a quarterly basis, when profitable. But I believe the C2 business model seems to allow people to cancel prior to the end of a quarter to avoid the fee. Is that the case?
Thanks.
Yes. But you can refuse them to subscribe again, so if they really trade your system and your system is good…
Raystonn,
You will never be able to know with 100% certainty the real account size of your subscriber. I.e. even with Bulldogfx (getting compensated a % of the trade value), if I’d be a fund manager I could easily replicate those trades in the fund’s own account, without you ever knowing about it. The only feasible route is to manage someone’s money through a limited POA and negotiate a contract that prohibits the person replicating the trades in another account.
However, there are other ways to benefit through “segmentation”. E.g. you could offer a system that takes every other trade of your main system for 1/2 of the fee, a system that takes every fourth trade for 1/4 of the fee. This would allow you to charge along the demand curve, and models exist to estimate the optimal subscription fees. Your cable internet provider basically does the same, by offering different packages that vary by connection speed and price.
There’s also a more subtle way in which you’ll benefit from a situation in which a large fund would follow your signals (without even paying you anything). Since you always have the option to step in and out of the trade before the fund, you can make a large profit from front-running your subscribers (and I wouldn’t be surprised if some vendors are taking advantage of this). I.e. you get into your trade, issue the signal, the fund (and all other subs) get in and move the market for a few seconds in the direction of your trade, and you’ll be able to bank an almost risk-less profit. If you’re in a prop shop with access to large leverage, you could make a lot of money this way, without even being in the trade yourself for more than a few seconds around the time you issue the signal.
I strongly discourage use of such shady tactics. I wouldn’t want to profit by misleading others. Simply put, I want to profit as I help others profit. I don’t want to ask for more than a subscriber made off my system, and I don’t want to ask for too little.
As an experiment I placed a very high monthly “if profitable” fee on my system. I very well may not get a single subscriber. But I would rather continue trading my system alone than give it out for peanuts. My motivation for offering it on C2 is merely to increase my capital more quickly for trading in my own system.
Thanks.
My motivation for offering it on C2 is merely to increase my capital more quickly for trading in my own system.
Hi Raystonn. I am here to increase my trading capital also. I do believe however the way to experience success for your own self is to help others experience success for them selfs. There is so much to gain by giving and so much to gain by learning. C2 is the perfect tool to do both of these things. Networking no matter what field a person is in is the most powerfull way to the top. Money is by far the most powerfull tool in this society (The United States). By using money constructively you can propel your self to an unlimited amount of greatness. It is the rare titewadd that is as successful as the individual that knows how to use power and networking to his advantage.
As a subscriber on C2 I entirely agree with you, and it would be against my own interests to encourage you or others to exploit this. But I also believe markets are usually taking care of things quite efficiently and the safest way to make a profit on something (not just securities) is to buy it and know for sure there’s a person who wants to buy it from you for a higher price.
I don’t know if such a practice necessarily should be called shady. If I would be subscribed to such a system, I’ll probably notice quite a bit of slippage and can evaluate myself if it pays off to stay subscribed to that system. Nothing shady about that.
There were a lot of discussions about C2’s payments to system vendors.
If Raystonn thinks that he is underpaid. Go ahead. Open “hedge” fund, open “managed accounts” (it’s usual practice). Simply, take your money yourself lol
Eu
You will never be able to know with 100% certainty the real account size of your subscriber.
Practically speaking it’s possible for stocks for a system vendor to figure out amount of TC in a game. Not 100%, but it’s very close. However I use it not for my ego, but only for calculation of probabilities of fills.
Eu
it’s possible for stocks for a system vendor to figure out amount of TC in a game
absolutely, and not only for a vendor but for anyone with access to time & sales data and a little knowledge of statistics. However you won’t be able to know for sure which subscriber in particular is the fund. So, it’s difficult to take appropriate action.
absolutely, and not only for a vendor but for anyone with access to time & sales data and a little knowledge of statistics.
Right. Shh… 
However you won’t be able to know for sure which subscriber in particular is the fund. So, it’s difficult to take appropriate action.
Which fund? Do you think somebody is out of mind to put relatively big capital to C2 system without contacting of the system vendor first? Are you kidding?
Eu
Which fund?
Yeah, that’s the most important argument against Raystonn’s worries. No fund with serious capital would start to trade a C2 system without first hiring the vendor or negotiating some longer-term contract.
Exactly true.
It’s nearly impossible to find reliable models that work over time, as anyone who was been monitoring C2 for at least one year well knows.
Funds would be ECSTATIC to find and make proprietary a new successful trading model. The last thing on their minds would be to short-change the person responsible for the model.
Worrying about fills and slippage before having a proven track record is putting the cart before the horse. Get your track record first, worry about pricing second.
